21 27 March 2001
Dalli outlines fiscal strategy
By Nadine Brincat
During a press call to the future premises of the Malta Stock Exchange, held at the former Post Office in Valletta, Finance Minister John Dalli spoke for over 40 minutes on the realisation of the benchmarking exercise and the latest on the taxation of interest from collective investment schemes.
"The country's financial imbalance is a reality we have to face with determination, for the good of the community, he said, when opening his address, yesterday. "Taxes and expenses must be balanced and proportionate, there will be no increase in benefits unless there is an increase in productivity. Although this is logical, many do not understand it."
Mr Dalli announced that the tax compliance unit is currently holding a benchmarking exercise on profits from business.
"These profits will not be used as an ex-officio, but they will be indicators for both the taxpayer and tax investigators," he stressed.
The Finance minister added that when the first benchmarks are completed by the tax compliance unit, there will be discussions with organisations representing professionals with the Malta Council for Economic Development.
He maintained that the discussions would not take the form of negotiations and the government was determined to follow its Budgetary plans seriously.
Mr Dalli said that the discussions should be built on the facts and objectivity.
During his on-site press conference, Mr Dalli also dwelt on taxation on interest from collective investment schemes, a measure to address an anomaly caused by the use of incentives at the stock exchange.
"When we created the stock exchange we wanted to create a culture of investment, that would benefit companies, investors and individuals," he continued.
He said there had been a trend that those operating collective investment schemes were being organised in a way that they were, instead of passing forward the interest annually, and liable to tax, retaining the interest, so that the individuals would only receive the interest when the investment was sold.
He added that the operator would accumulate the interest, pay for it once on selling and give the impression that this was not interest but capital gains.
"With the changes we are making, things will be much clearer," Mr Dalli stressed.
He said that investment schemes paid by banks, bonds or stocks, will be taxed like interest paid to banks or individuals. However, to allow these schemes to adjust, for a limited time, taxation will not be at 15 per cent as in other cases, but at 10 per cent.
During his press conference, Mr Dalli also addressed the issue of the country's financial imbalance, the fringe benefits, government expenditure, setting of benchmarks for government employees, curbing abuses of social services, and the Private Public Partnership.
On fringe benefits he said that there were many aspects which were not taxable, including health insurance, telephone bills, gifts for long service and scholarships apart from up to Lm500 for petrol expenses annually.
Mr Dalli said that the fringe benefits implementation served to harmonise the administration of tax.
He hit out at the Opposition, calling on it to explain how and in what way it would curb public expenditure.
He also added that the Labour party had given up on its principles with its calls for introducing tax exemptions to those who earn most money.